Banking News

The prospect of record low savings rates continuing is forcing many savers to review how they allocate their capital in an attempt to achieve the level of returns they have previously enjoyed. Investing in the stock market inevitably involves putting your capital at risk however there is a middle ground which continues to attract increasing interest – the structured deposit. With this in mind, we take a deeper look at this savings alternative to help understand why more and more savers are starting to see their appeal. more

With the current economic environment asking savers far more questions than it gives answers, it is good to know that there are alternatives available. We take a look at one such alternative that is proving particularly popular as savers face the harsh reality that the more traditional fixed rate savings products are failing to meet their needs. more

Millions of savers are facing the harsh realisty that there is little hope of change to interest and savings rates in the coming years. However, those with Cash ISAs do have one further option to consider – the ISA transfer. We take a closer look at why this is becoming a rising trend as well as what this could mean for those looking for the potential to improve the returns from their capital. more

With so many savers joining income investors in the hunt for high yields, being able to quickly understand and compare the numerous options available has become even more important. We therefore compare two of our most popular income investments to help understand what is driving their popularity and why they might meet your income needs. more

Proposed £500,000 compensation for savings accounts

01 April 2009 / by Rachael Stiles

It has been proposed that savings account customers could be compensated for up to £500,000 if their bank or building society fails, the Financial Services Authority has announced.

The compensation cap, currently at £50,000, could be raised to £500,000 in certain circumstances if a proposal from the Financial Services Authority (FSA) is given the go ahead.

However, the new limit would only apply to balances for up to six months, and would not protect those customers who hold high balances over extended periods of time.

The FSA said that the higher limit would apply to savings account customers whose balances were temporarily high, for example, after selling a property; according to the FSA, the higher threshold would cover 95.5 per cent of all house sales.

The new limit could also apply to those customers who had just received large sums of money from other sources, such as receiving an inheritance, divorce settlements, redundancy payments, or pension lump sums.

The Financial Services Compensation Scheme (FSCS) currently protects savings account customers for only the first £50,000 with each savings provider, which means any amount over that limit in the account would be lost if their bank or building society was to fail.

"Our proposals will protect people who have little or no choice about holding a high balance for a limited period over the current FSCS limit of £50,000," explained Thomas Huertas, director of the banking sector at the FSA, "before they can diversify it, if they wish, between different institutions."

Mr Huertas added that "This change would contribute to the banking reform objective of providing effective compensation arrangements in which consumers have confidence."

Whether or not the FSA's proposal comes to fruition depends on the Government successfully negotiating an exemption from European Union rules, which are soon expected to enforce a protection limit of €100,000 across the EU from 2010.